Question

Difficulty: MediumIndigenization, Privatization, and Commercialization Policies

Following economic reform directives, a state-owned public utility is required to operate as a self-financing, profit-oriented enterprise without receiving government subventions, while the government retains complete equity ownership. Which economic policy does this reform illustrate?

A
Partial privatization
CommercializationAnswer
C
Indigenization
D
Import substitution

Answer

Commercialization is the correct policy because it reorganizes state-owned enterprises to function as profit-seeking, self-sustaining businesses while retaining full public equity ownership.

Commercialization is a public reform policy where state-owned enterprises are reorganized to operate efficiently on a commercial, profit-making basis, covering their operational costs without relying on government subventions, all while retaining full public equity ownership.

Step-by-Step Solution

1

Analyze the equity ownership structure specified in the scenario

The government retains 100% equity ownership of the enterprise.

Establishing ownership status distinguishes commercialization (state ownership retained) from privatization (private equity transfer).

2

Analyze operational and financial directives

The enterprise must operate for profit, achieve self-financing, and function without government subventions.

Commercialization requires state enterprises to adopt private commercial practices and eliminate budget dependencies.

3

Synthesize ownership and operational findings to identify the economic policy

Profit-oriented restructuring combined with full state ownership defines commercialization.

This directly aligns with Nigerian public enterprise reform guidelines.

Key Concept

Distinction between commercialization and privatization in public enterprise reforms

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Topics

Indigenization, Privatization, and Commercialization Policies